Failure to reform medical schemes is costing you

GOVERNMENT HAS NOT INTRODUCED MEASURES TO ENABLE THE PRIVATE HEALTHCARE SYSTEM TO BE SUSTAINABLE Your contributions would be lower if government resumed its reform programme and medical schemes clamped down on fraud. Laura du Preez reports

The medical scheme industry is at risk of becoming a “regulatory orphan” while government focuses on National Health Insurance (NHI), and the failure to follow through on its reforms is costing you, the member, money, a medical scheme conference heard this week.

The annual Board of Healthcare Funders (BHF) conference, which was held in Cape Town this week, heard that contributions could be almost 30 percent cheaper if government completed its reforms, the industry collaborated to eradicate fraud and schemes identified the most efficient healthcare providers (see “Your contributions could be 30 percent cheaper”, right).

The BHF’s members include medical schemes and the administrators of schemes.

Christoff Raath, an actuary and chief executive of the Health Monitor Company, says that, because recent health reforms have focused exclusively on NHI, the regulation of the medical scheme industry is being neglected, and it is at risk of becoming a “regulatory orphan”.

The Medical Schemes Act introduced “social solidarity”, which means that your contributions are unrelated to your health risks and, in general, your claims are paid according to your needs, not what you can afford to pay.

But the introduction of community rating (all members who belong to an option pay the same contributions), open enrolment ( schemes must admit anyone as a member) and prescribed minimum benefits (PMBs) (essential benefits that, by law, all schemes must cover) without the implementation of measures to ensure the sustainability of the medical scheme industry has been “toxic”, Raath says.

The required sustainability measures include risk equalisation (equalising the cost of providing minimum benefits across schemes) and compulsory membership (at makes it mandatory for medical schemes to pay PMB claims in full will not be amended at this stage, he says.

The code deals with issues such as paying claims that can be identified as PMBs, how long you have to prove that a condition is a PMB, alternative treatment for PMB conditions and the payment of claims for conditions that are presumed to be PMBs.

Amendments proposed in 2008 to introduce risk equalisation across medical schemes and to price common benefits across a scheme (see page 4) will not be introduced.

Gantsho says there were 58 medical scheme amalgamations and liquidations between 2002 and 2011, although membership has increased. The council’s forecasting model suggests that, of the current 97 schemes, only 54 will be left by 2025.

NHI is an important and necessary policy and Health Minister Dr Aaron Motsoaledi has had some significant achievements, he says.

The problem is that NHI may take 25 years to implement. Case studies show that the shortest time for any country to implement NHI was 40 years, he says. The question is: what happens to medical schemes in the meantime?

Although some amendments to the Medical Schemes Act have now been proposed, risk equalisation has been abandoned and mandatory membership for the employed is also not on the cards.

In addition, Dr Anban Pillay, deputy director-general of health regulatory and compliance at the Department of Health, says it is unlikely that the amendment bill will come before Parliament during this year’s legislative cycle.

COMPETITION STIFLED

The conference heard that the way in which the healthcare system is structured prevents competition that would lower the cost of healthcare for scheme members and users of the public healthcare system.

As a result, medical schemes are competing by incrementally reducing their benefits, says Professor Alex van den Heever, who holds the Chair in Social Security Systems, Administration and Management at the University of the Witwatersrand. In other words, each scheme is trying to stay ahead of the pack by making you pay for more of your health care, instead of the scheme paying out of its risk benefits.

The Competition Commission is due to begin its inquiry into the private healthcare sector next month. Van den Heever says that, if the commission does its job properly, it will identify both the problems in the healthcare sector and

the rules that must be introduced to enhance competition.

The commission aims to complete its work within two years, but speakers at the BHF conference expressed doubt that the commission could meet this deadline and said a five-year horizon would be more realistic.

The Department of Health is awaiting the outcome of the inquiry before addressing problems with one of the main features of the medical scheme regulatory regime, the PMBs. The PMB regulations oblige medical schemes to pay your PMB claims in full, regardless of what your doctor or other healthcare provider charges.

Raath says that, as a result of the absence of any regulated ethical or guideline tariffs for healthcare services, the PMBs have had a “toxic” effect on schemes’ finances.

Guideline tariffs were in place until 2010, when they were struck down by the North Gauteng High Court on the grounds that the process by which they were drawn up was flawed.

The PMBs are absolutely necessary to ensure that you, the member, are properly protected against healthcare costs and “junk” products that could emerge in an unregulated environment, Raath says.